Zoltek Seems to Lack Zing

Carbon fiber maker Zoltek's (NAS: ZOLT) numbers seem to be as volatile as its stock prices. After reporting a 42% jump in its second-quarter revenue, the company's third-quarter sales have slipped 10% compared to last year.

Can the wide applications of carbon fibers save Zoltek's profits?

In detailZoltek's revenue fell to $38.6 million from $42.4 million in the year-ago quarter. This was primarily because of lower sales of its core product -- carbon fibers. In contrast, peer Cytec's (NYS: CYT) engineered segment, which mainly deals with carbon fibers, saw its sales rise by 13% in its second quarter. Likewise, Hexcel's (NYS: HXL) second-quarter sales were also up by around 16%.

Zoltek's fall in revenue was mainly because of fluctuating demand from a large customer. Aggregate sales to Vestas, its largest wind turbine customer, slipped to $10.2 million from $17 million a year earlier. This looks like a concern, as there's considerable

Higher cost of raw materials also hurt the company's margins. A primary raw material for fibers is a propylene-based product, prices of which touched historical highs this year, hurting Zoltek and other companies like Hexcel as well. Zoltek, in an attempt to offset such costs, had also raised some prices in the last quarter.

As a result of lower revenue, Zoltek's operating loss widened from $0.9 million to $1.2 million this quarter, and its net loss went up significantly to $1.5 million from $0.4 million a year ago.

High demand hopesZoltek's inventory levels rose significantly by around 39% in its third quarter as the company expects higher sales going forward. The company also started its precursor and carbon fiber lines at its Mexican facility in May, aiming to meet the higher expected demand.

I, however, am more interested in numbers, and since revenue actually fell this time, I can only hope that the company's higher-demand anticipation comes true as higher inventory do not make much sense to me when revenue fails to rise. Inventory buildup was also one of the factors for a higher negative cash flow from operations.

No hitting the brakesA point worth noting is an increase in the sales of Zoltek's technical fibers, which finds primary usage in aircraft brakes.

Aircrafts are now increasingly opting for carbon brakes instead of metal ones. Goodrich (NYS: GR) , for instance, has recently been selected by airlines such as KLM, Transavia, and Saudi Arabian Airlines for supply of carbon brakes for their new fleet of Boeing aircrafts. This signals a higher demand for carbon brakes, which will mean more demand for fibers, too. Apparently, all this indicates a brighter future for Zoltek, especially its technical fiber segment in the coming future.

The Foolish bottom lineThe company might be targeting $500 million in revenue by mid-decade, but unless its sales translate into higher profits, investors may not be interested. The company's line of business (considering the wide usage of carbon fibers in big industrial applications) may make it look like a stock for the long run, but for now, the weak numbers tell a different story.